While ST Engineering has a strong execution track record, the slowdown in its order book growth, slower-than-expected turnaround in the urban solutions & SATCOM business and strong year-to-date price performance of the counter nudge us to downgrade ST Engineering to HOLD.
Mixed Operating Trend
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Order book saw a marginal dip, partly due to forex.
Defense steady; Aerospace & USS decelerating
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Commercial Aerospace (CA) business saw 3Q24 revenue of S$1.054b, -2% q-o-q, +7% y-o-y. 9M24 revenue for the segment was up 16% y-o-y to S$3.285b. Engine MRO saw strong growth. PTF was affected by feed stock challenges but partially mitigated by airframe MRO.
Urban Solution & SATCOM (USS) business saw 3Q revenue of S$455m, -7% q-o-q, -5% y-o-y. 9M24 segment revenue was flat at S$1.373b. Higher revenue from Urban Solutions (includes TransCore) was offset by lower revenue from SATCOM.
Overall, Defense & Public Security (DPS) business is holding the group. Commercial Aerospace (CA) business is seeing change in business mix due to supply chain issues. Urban Solution & SATCOM (USS) business is taking longer to turn around.
Order book flatlines
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Above is an excerpt from a report by Maybank Research. Clients of Maybank Securities may be the first to access the full PDF report @ https://www.maybanktrade.com.sg/.
